• Revenue: $195 million, up 12% year-over-year.
• Operating Income: $45 million, up 24% year-over-year.
• Operating Margin: Expanded by 2 points to a record quarterly high of 23%.
• Free Cash Flow: $91 million fiscal year-to-date, a 20% increase year-over-year.
• Annual Recurring Revenue (ARR): $491 million, up 10% year-over-year.
• Subscription Net Retention Rate: 108%, a 10-quarter high.
• Gross Margin: Approximately 74%, down 0.5 point year-over-year.
• Marketplace and Other Revenue: Increased 20% to $50 million.
• Data Marketplace Revenue: Grew by 18%, with CTV accounting for roughly 20%.
• Operating Cash Flow: $45 million, up from $17 million a year ago.
• Stock Repurchase: $10 million in the fiscal third quarter, $76 million fiscal year-to-date.
• FY 2025 Revenue Guidance: $741 million to $743 million, up 12% to 13% year-over-year.
• FY 2025 Operating Margin Guidance: 18%, up approximately two points year-over-year.

• Warning! GuruFocus has detected 9 Warning Signs with DLX.

Release Date: February 05, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• LiveRamp Holdings Inc (NYSE:RAMP) exceeded expectations for revenue and operating income, achieving double-digit revenue growth for the fourth consecutive quarter.
• The company reported a 12% increase in revenue and a 24% increase in operating income, with operating margin reaching a record high of 23%.
• Sales momentum rebounded significantly, with improved pipeline conversion rates and strong performance in data marketplace and usage revenue.
• LiveRamp's data collaboration platform is well-positioned to capitalize on the growing demand for enhanced measurement of digital advertising using first-party data.
• The company continues to make progress on its Rule of 40 journey, with expectations to reach or surpass Rule of 30 this fiscal year, driven by revenue growth and operating margin improvements.

Negative Points

• Despite strong sales momentum, the total customer count experienced pressure, particularly from smaller, lower ACV customers and market consolidation.
• The company faces challenges in maintaining consistent sales efficiency and is not yet at historical norms in this area.
• Gross margin slightly decreased by 0.5 points year-on-year, reflecting short-term investments in platform reliability and data processing speed.
• The expected deceleration in revenue growth in Q4 to high-single digits reflects the challenging sales environment experienced in prior quarters.
• Stock-based compensation increased significantly, impacting GAAP operating income, partly due to the Habu acquisition and prior year tax planning benefits.

Q & A Highlights

Q: Can you provide additional color on the drivers of the improved sales momentum in the quarter? A: Scott Howe, CEO, emphasized that improved sales momentum starts with great salespeople and the scale of LiveRamp's network. The network effect enhances product efficacy, allowing participants to connect and collaborate effectively. The pipeline conversion rate improved significantly, particularly in connectivity and clean rooms, with both new nodes and increased usage driving more data consumption.

Q: Was there much Oracle impact on Data Marketplace in the quarter, and do you expect any impact in the fiscal fourth quarter? A: Lauren Dillard, CFO, noted that Oracle added a few points of growth to the data marketplace in Q3, and this is expected to continue. The impact is challenging to isolate due to the scale of LiveRamp's data marketplace, which includes about 200 active data providers.

Q: How do you view the sales momentum and its potential impact on growth as we move into FY 2026? A: Scott Howe, CEO, expressed confidence in the durability of sales momentum, driven by early-stage opportunities in data collaboration, commerce media, and CTV. The progress made this quarter is expected to result in a stronger back half of next year, with increased usage and declining churn indicating potential for continued growth.

Q: Can you elaborate on the sales tactical changes that are benefiting execution and sales efficiency? A: Scott Howe, CEO, mentioned that while they are not yet where they want to be, there has been a nice step forward in sales efficiency. The focus is on maintaining seasoned sellers and leveraging channel partnerships, including systems integrators, cloud partnerships, and commerce media networks, to drive new logo acquisition and usage growth.

Q: What are the next iterations for making the product easier to use, and how do you plan to enhance usability? A: Scott Howe, CEO, highlighted three areas of focus: improving usability with more AI integration and standardized reporting, enhancing measurement capabilities for complex data connections, and increasing integrations with AI applications to offer a variety of choices for clients. These efforts aim to make the product more intuitive and effective for users.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.